California Business Won’t Accept Prop 65 Reforms Without a Fight
On April 8, 2015, the California Chamber of Commerce and 170 businesses and organizations (the Coalition) submitted detailed comments to the California Office of Environmental Health Hazard
Assessment's (OEHHA) proposed Proposition 65 regulatory revisions. These comments responded to OEHHA's recent pre-regulatory draft, which encompass the most sweeping changes since Prop 65's inception in 1986.
Notably, the Coalition provides evidence that the proposed changes could cost businesses between $410 and $818 million in the first 10 years, notes how the reforms trigger potential First Amendment violations, and asserts that multiple provisions exceed OEHHA's statutory authority. As evidenced by these comments, the business community remains deeply concerned that OEHHA's proposed "reforms" do not achieve the agency's or Governor Jerry Brown's purported goals of reducing frivolous litigation and increasing consumer confidence in and usability of Prop 65 warnings.
Officially known as the "Safe Drinking Water and Toxic Enforcement Act of 1986," Prop 65 requires businesses to notify Californians of potential exposures to specifically-listed chemicals "known to" the State to cause cancer, birth defects, or other reproductive harm. Despite the law's laudable goal of consumer empowerment and education, Prop 65's most notable "achievement" has been the creation of a cottage litigation industry and accompanying goldmine for "bounty hunter" attorneys filing "gotcha" lawsuits compelling companies to confront a Hobson's choice of paying excessive settlements (including plaintiff attorneys' fees) or litigating through trial and verdict. Thus, in 2013, Governor Brown stated his strong desire for regulatory reform to bring to an end the constant threat of "shake-down" lawsuits.
As OEHHA responded with various reform drafts, the Coalition attempted to collaborate with OEHHA to improve the proposals and address the business community's numerous concerns. The Coalition consistently demonstrated that these proposals would make compliance with Prop 65 more difficult, create new avenues for litigation, and have a substantial negative impact on virtually all companies doing business in California. Our analyses of these initial comments are available here and here.
When OEHHA released its most recent formal rulemaking draft in January (see previous Client Alert here) and signaled that this may be the last round, the Coalition struck a different tone. The Coalition's current comments send a strong signal that the business community is prepared to fight OEHHA on key provisions considered untenable and unduly burdensome. Indeed, for the first time, the Chamber's comments imply a path to future litigation and make clear that OEHHA must substantially revise these provisions if it wants business community support.
Economic Cost Analysis
The Coalition criticizes OEHHA's one-page summary, concluding that its regulatory action "does not impose any new requirements upon private persons or businesses because it primarily provides non-mandatory guidance and a voluntary safe harbor process of providing warnings already required under the Act that businesses can choose to follow." (ISOR, at pp. 42-43). In contrast, the Coalition concludes that OEHHA's analysis is fatally flawed as it presumes, without evidence, that the financial impact on businesses would be de minimis as few businesses would opt to utilize the proposed warning.
To refute this claim, the Coalition hired a team of economists and business experts to conduct an economic impact analysis which reported that the proposed changes to Prop 65 could cost businesses from $410 million to $818 million in the first 10 years. Moreover, the analysis found that initial compliance costs would range from $336 million to $748 million. As a result, the Coalition urges OEHHA to provide a meaningful economic analysis and circulate another pre-regulatory draft for further public comment. The Chamber contends that, as a matter of California law, such an analysis is a "requirement  for a Major Regulation," and until OEHHA conducts such an analysis, "a necessary and critical  component of the rulemaking process" will be missing.
Subdivision 25600(d) of the OEHHA proposal states: "A person may provide information to the exposed individual that is supplemental to the warning…such as further information about the form or nature of the exposure and ways to avoid exposure…supplemental information may not contradict, dilute, or diminish the warning…" (emphasis added). The Coalition contends that because OEHHA has failed to define what constitutes information that is "supplemental to the warning" or what may "contradict, dilute, or diminish the warning," it is unconstitutionally vague and, thus, violates the First Amendment.
The Coalition proposes reverting back to the language in a previous discussion draft, which stated: "In no case shall supplemental information contradict the warning provided pursuant to Section 25249(e)." See September 23, 2014, Section 25601(c).
Listing for 12 Chemicals
The Coalition argues that OEHHA lacks statutory authority to designate 12 selected chemicals that would require specific disclosure on warning labels, claiming no such authority is provided by Prop 65, and such a promulgation is not necessary to carry out Prop 65's purpose. In addition, the regulation can be challenged on constitutional due process grounds, and found to be void for vagueness, as OEHHA appears unbound to follow in the future its claimed criteria for creating the list of 12. Accordingly, the criteria for identifying future chemicals could change at any time and without prior notice.
Furthermore, the Coalition reasserts its previously articulated position that OEHHA should eliminate any requirement that the 12 specified chemicals be identified in the "safe harbor" warning. According to the Coalition, this requirement creates another subcategory of "overwarning," and another avenue of litigation for plaintiffs' attorneys. Furthermore, businesses will face a substantial economic burden as they would be obligated to test their products for the presence of all 12 chemicals in efforts to substantiate a reason not to include all of the listed chemicals on their warnings. This may impose a substantial economic burden on the companies because chemical assessments cost anywhere from $10,000 to over $100,000. As a result, the Coalition proposes that businesses should have the leeway to include a warning statement such as: "Can expose you to chemicals, such as X, known to the State to cause..."
Method of Transmission
The existing regulations provide that the warning message should be communicated "prior to exposure." However, the OEHHA proposal requires warnings to be provided "prior to or during the purchase of the product." Proposal 25603 (a)(2).
As written, this provision would call into question any warnings provided in user manuals or on internal package inserts. The Coalition takes a strong stance against this requirement as it exceeds OEHHA's statutory authority. Thus, the Coalition warns that, "[t]his clearly will subject the proposed regulations to litigation if adopted in its current form."
Lead Agency Website
Section 25205 proposes that OEHHA will develop a website to serve as a resource to members of the public to receive supplemental information and explain the basis for Prop 65 warnings. Businesses would be required to provide information regarding their warnings to be included on the website. The Coalition has discussed the Lead Agency Website in prior comments. However, these comments clarify that the Coalition believes that the supplemental information requirement far exceeds the authority granted to OEHHA.
In addition to proposed avenues for challenging Prop 65, the Coalition also offers more moderate feedback and proposed revisions regarding topics such as:
- Clear and Reasonable Guidance: The proposal eliminates the prior "clear and reasonable" guidance regarding warning sufficiency. The Coalition proposes that the current explanation of the meaning of "clear and reasonable" should be incorporated to decrease the risk of litigation over the sufficiency of warnings.
- Effective Date of Regulation: Currently, the proposal provides that the warning regulations will become effective two years after their adoption to allow for products currently in the market to "sell through." The Coalition argues that this is an insufficient amount of time to allow for products to exit the marketplace. As a result, it asks for an unlimited sell-through period for products in the supply chain at the time the regulation becomes effective.
- Grandfathering: The Coalition asks that OEHHA revise the proposed warning regulation to state, unequivocally, that court-approved Prop 65 warnings are "clear and reasonable" and can be relied upon by both settling and non-settling parties.
- Warning Symbol: As opposed to using an American National Standards Institute (ANSI) symbol, the Coalition argues that it would be more sensible to use the symbol "P65" or "65," which would provide more information as to why the warning is given.
While OEHHA signaled that the draft was not a final product, it has also stated that it plans to finalize its regulatory reforms by this Fall. Thus, events will move quickly in the next few months. The Coalition's comment letter signals that its members and the business community continue to track closely the pre-regulatory process and OEHHA's responsiveness to their concerns.
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